Douglas Parkhill first described the concept of a "private computer utility" in his 1966 book The Challenge of the Computer Utility. The idea was based upon direct comparison with other industries (e.g. the electricity industry) and the extensive use of hybrid supply models to balance and mitigate risks.
"Private cloud" and "internal cloud" have been described as neologisms, but the concepts themselves pre-date the term cloud by 40 years. Even within modern utility industries, hybrid models still exist despite the formation of reasonably well-functioning markets and the ability to combine multiple providers.
Some vendors have used the terms to describe offerings that emulate cloud computing on private networks. These (typically virtualization automation) products offer the ability to host applications or virtual machines in a company's own set of hosts. These provide the benefits of utility computing – shared hardware costs, the ability to recover from failure, and the ability to scale up or down depending upon demand.
Private clouds have attracted criticism because users "still have to buy, build, and manage them" and thus do not benefit from lower up-front capital costs and less hands-on management, essentially "lacking the economic model that makes cloud computing such an intriguing concept.Enterprise IT organizations use their own private cloud(s) for mission critical and other operational systems to protect critical infrastructures. Therefore, for all intents and purposes, "private clouds" are not an implementation of cloud computing at all, but are in fact an implementation of a technology subset: the basic concept of virtualized computing.
